EU Market For Cars Backfires As VW Cuts Sales Guidance

Driving to become the world's largest automaker by the end of this decade, Volkswagen AG said Friday it plans to make €50.2 billion ($64.7 billion) in strategic investments during the next three years. Photo: Reuters/Denis Balibouse

The European automotive market continues to cough and chug along, engine knocking, crawling ever more slowly down the highway of poor sales performance and over-capacity. Volkswagen AG (PINK: VLKAY), up until now one of the only companies experiencing steady European sales, has cut its internal European sales guidance by 150,000 units, according to a published report.

German news magazine Der Spiegel said Volkswagen was dropping its European sales guidance by 150,000 vehicles just a few days after another German magazine, Handelsblatt, reported the company was dropping its guidance by 250,000 vehicles, Reuters reported Monday.

VW denied the claims by Handelsblatt, but has thus far not denied the Der Spiegel report. The company has confirmed that it is lowering its European sales target.

The news that VW is lowering its European sales target comes at the same time the company is making a major global sales push in the hopes of surpassing Toyota and General Motors Company (NYSE: GM) to become the world's largest automaker. While VW has found itself in the position of cutting annual sales estimates in Europe, it is simultaneously recording massive sales gains in other markets, like the United States, where August sales rose 62.5 percent over the previous year. Volkswagen has had 24 months of continual year-over-year sales gains in the U.S., but its European home-market may be beginning to undercut global sales growth with its sapping combination of low consumer confidence and glutted car lots.

The cutting of VW's European 2012 sales estimate may not be the end of its quest for global automotive domination, though. The company said that its year-to-date sales are still up 9.1 percent over 2011 at around 5.2 million vehicles, according to Motor Trend.

The news that VW is cutting its European 2012 sales estimates is not good for Europe, though, coming as it does on the heels of a recent report by Morgan Stanley saying that General Motors had lost between $10 billion and $20 billion over the last three years on account of its failing European Opel-Vauxhall unit and that getting rid of liability would cost the company an additional $7 billion to $13 billion. Ford Motor Company (NYSE: F), for its part, could lose as much as $1 billion this year in Europe, according to Motor Trend.